Becker's ASC Review

ASC Turnarounds: Ideas to Improve Performance 8 10 Biggest Factors in Negative Cash Flow at ASCs & How to Turn Them Around By Laura Miller H aving cash on hand is important for any business, especially healthcare providers in today's uncertain economic environment. "The more cash that's in the pocket, the more time you can think strategically instead of reacting to the happenings of the day," says Patrick McCarthy, chief network development officer for Access MediQuip. "Forge relationships with major players in the business community and get inside their narrow networks. Keep the care local and serve your neighbors to increase quality." Here are 10 big contributing factors to negative cash flow at ASCs and how you can turn these situations around. 1. Reimbursements drop. All providers are preparing for the trend of declining reimbursements to continue. Government payors and insurance companies will be looking for the highest quality providers at the lowest cost, which means aligning incentives could maximize cash flow even as reimbursement rates tumble. "Physicians and staff must align their incentives with payors so everyone is focused on pay for performance," says Mr. McCarthy. "It's always important to pay attention to what the government is doing because commercial payors are piggy backing government programs within 12 to 36 months. Watch how those reimbursements change and keep a close eye on how physicians are reimbursed." Review managed care contracts on an annual basis to see where there are opportunities for increase. "Understand your costs for procedures so you can compare reimbursement to your costs," says Reed Martin, COO of Surgical Management Professionals. "Any time it's close you want to target that procedure as an area for increase. Similarly, negotiate to get reimbursed for multiple procedures and implants whenever possible." If the surgery center negotiates a multi-year contract, include escalators to adjust for inflation. Meet payor concerns about reimbursement rates with the other possibility: performing these procedures in the hospital at hospital rates. "You need to provide information to the insurance company about why patients benefit from surgery at the ASC," says Mr. Martin. "Share your patient satisfaction statistics, clinical outcomes and reimbursement versus the hospital. If some of these cases are done on an outpatient basis, they are more cost-effective. At ASCs, there is also a lower complication rate, higher quality and higher patient satisfaction." 2. Overhead costs are too high. Beyond materials management, surgery centers may find that their expenses are too high. This includes contracts with service providers, facility rentals, equipment expenses and staff salary. Surgery centers should be flexing up when case volume is up and flexing down when it's low; try to avoid overtime hours and downtime for the staff. "Labor and facility expenses are higher in an urban area, so anything they can do to increase case or throughput will assist with respect to cash flow for an urban facility," says Mr. Martin. Controlling inventory is another tactic to keep overhead costs low. "Any supply items where you have an excess of one month inventory on hand is excessive," says Mr. Martin. "They can be returned to the vendor or utilized at another facility within your ASC management company's network. We can replenish stock far quicker than a month, so anything extra is actually money on the shelf that could improve cash flow." Conduct an annual analysis of contracts for services such as housekeeping, equipment management, laundry services and anesthesia. "There are alternatives for all these services, so evaluate your contracts on an annual basis and make sure you are getting the best value as a combination of service and cost," says Mr. Martin. "Benchmark costs by physician and specialty to identify opportunities for value improvement." Provide benchmark information for surgeons both from within the surgery center and from other facilities as well. When you present the information, blind the physicians so they can see where they stand without knowing who the other individual surgeons are. Patrick McCarthy Reed Martin 3. Patient volume is under projected levels. Over estimating patient volume leaves surgery centers over-built and under-collecting. Investors should rely on conservative estimations on the number of cases they will bring into the facility and plan for a few less than projected. "You have to have reasonable volume assumptions," says Joseph Zasa, co-founder and managing partner of ASD Management. "If you think you can bring in 100 cases per month, you will probably safely reach 70. To increase patient volume, make sure patients have a good experience at the center. Patient quality and care, physician and patient satisfaction, managed care contracts and business office functions all ensure a steady patient flow in the surgery center." Examine each key area associated with patient volume and make sure your center is reaching critical benchmarks to ensure quality, safety, satisfaction and efficiency. "Use established benchmarks and obtain objective analysis," says Mr. Zasa. "Not what managers say, but what the objective facts say. You have to measure and verify what is going on, and bring in someone from the outside to help you take care of these issues." Joseph Zasa Jim Devitt Surgery centers can consider bringing in new specialties or services, such as 23 hour stays, to capture more of the patient population. "Anything that increases the revenue line helps cash flow in the long run," says Mr. Martin. "The first thing to look at is case volume, which relates to adding surgeons and specialties." However, just bringing in more patients may not solve the issue. If the payor mix is bad and your center is bringing in less profitable procedures than projected, you'll still be in a negative cash flow situation.

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